Costco and Sam's Club compete for members. It makes little financial sense for people to pay to join both warehouse clubs, so each chain tries to find little ways to differentiate itself from its rival.
Sometimes, of course, the choice is geographic. If you live close to a Sam's Club, driving a distance to shop at Costco (COST) is probably not worth it.
In many markets, however, the two companies operate stores that are very close to each other. That gives consumers choice and pushes both chains to offer better deals, or at least differentiated ones.
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Both companies, of course, have their signature food-court deals and, at many locations, low-priced gasoline. But the two rival warehouse clubs have taken different approaches to selling one item that pretty much every member buys at some point: smartphones and their associated service plans.
It's an area of competition that changed after Costco lost a key partnership in February 2023.
Image source: Brooks Kraft LLC/Corbis via Getty Images
Costco changed how it sells smartphones
Costco used to offer good deals on smartphone plans from AT&T, Verizon and T-Mobile. The company had been working with a third-party partner that operated the smartphone kiosks in its clubs.
That changed abruptly in February 2023 when its partner went out of business. Consumer advocate and radio host Clark Howard commented on the change.
“Costco had a sweetheart deal for years," he explained. "They had an outside vendor that set up the cellphone deal there and Costco members normally got vastly superior deals buying phones and signing up for service inside the Costco versus going to an AT&T, T-Mobile or Verizon store or wherever."
When it lost its partner, Costco briefly closed its smartphone kiosks, and when it reopened them, the service was not the same.
“Unfortunately, the deal that Costco had negotiated was too good, and the vendor went bust. So those booths disappeared. And what’s in their place at least for now … Costco is temporarily renting space to the big cellphone carriers, and the deals stink,” Howard added.
Costco has essentially split its warehouse locations among the three big carriers, which might, but are not obligated to, offer special deals there.
Sam's Club makes a deal with T-Mobile
Sam's Club has opted to partner exclusively with T-Mobile (TMUS) . That gives the company a relationship with the disruptive smartphone brand, which has long delighted in showing up AT&T and Verizon.
T-Mobile has extended two different deals to Sam's Club members. The first is also offered at the carrier's own stores.
"Sam’s Club members can now score some of the same great deals available at T-Mobile stores at Sam’s Club, such as up to $1,000 off select devices with eligible trade-in on Go5G Plus / Go5G Business Plus or Go5G Next / Go5G Business Next, plus additional member value — including free shipping on every T-Mobile order," the warehouse club said.
In addition, T-Mobile has extended an offer to people holding Sam's Club's pricier membership.
"Sam’s Club Plus members who switch to the Un-carrier (or add a new line) and pick up a device will receive a $60 Sam’s Club eGift card to spend at Sam’s Club every year they’re with T-Mobile and maintain their Plus membership," the company added.
"The eGift card can be used for anything including membership. That’s like getting a Sam’s Club Plus membership for just $50 a year (regularly priced at $110/year),"
The Sam's Club locations will be staffed by T-Mobile.
